US-China trade spat weighs on copper

Copper prices have hit three-week lows as worries about a trade war were reinforced after US President Donald Trump threatened to impose a 10 per cent tariff on $US200 billion ($A271 billion) of Chinese goods and Beijing warned it would retaliate.

Benchmark copper on the London Metal Exchange ended down 1.8 per cent at $US6,840 a tonne from an earlier $US6,809, its lowest since May 31.

"A second round of US-China trade tensions spur risk aversion and market concerns about the prospect of global economic growth in the future," said Xiao Fu, Head of Commodity Markets Strategy at BOCI Global Commodities.

"Meanwhile a resumption of dollar strength ... and weaker than expected Chinese economic data last week also weigh."

CHINA TARIFFS: China will impose additional tariffs of 25 per cent on 659 US goods in response to US plans to slap duties on $US50 billion of Chinese goods.

The new list is an expansion of an initial list of 106 US goods published on April 4.

CHINA GROWTH: Concern about growth in the world's largest consumer of industrial metals was reflected in China's stock market and the yuan.

Shanghai stocks tumbled nearly 4 per cent on Tuesday to a two-year low, while the yuan fell to a more than five-month low against the dollar.

DOLLAR: A strong US dollar also weighed on commodities. Dollar-denominated metals become more expensive for non-US firms when the currency rises. The dollar index against a basket of currencies hit its highest since July last year.

CHILE: Copper market participants are keeping an eye on labour negotiations at the Escondida mine in Chile.

Global miner BHP said last week it had responded to the latest contract proposal from unionised workers at its Escondida mine, the world's largest, triggering a new round of talks that could last a month or more.

"Chile's fresh employment laws introduced last year and a high copper price have emboldened union leaders," Morgan Stanley analysts said in a note.

"A tricky negotiation, but will it lead to a strike? Both sides will be keen to avoid such an outcome after wearing the high costs of 2017's stoppage."

WARRANTS: Traders are also watching a large holding, between 30 and 39 per cent , of copper warrants on the LME. It has fuelled worries about a shortage on the LME market and created a premium for the cash contract over the three-month.

PRICES: Aluminium was down 2.2 per cent at $US2,171 a tonne, zinc fell 2.1 per cent to $US3,002, lead slipped 0.8 per cent to $US2,415, tin ceded 0.6 per cent to $US20,375 and nickel lost 2.1 per cent to $US14,655.